Find out what’s really driving up your car insurance prices

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The average car insurance cost increased 22% in 2024 and 23% in 2023. No, that’s not a typo: Americans have seen their car insurance premiums increase by 20% (or more) for two years in a row. Where will this end? Many people may feel that the cost of car insurance will forever skyrocket for reasons beyond their control.

The fact is that car insurance rates are rising across the country for many complex reasons – the overall higher price of cars, the rising cost of car repairs, more frequent car accidents and more severe natural disasters like hurricanes and wildfires that destroy vehicles. All of these problems cause higher losses for car insurers.

For some people, car insurance also becomes more expensive due to speeding tickets or a history of accidents. But car insurance rates are also rising for a few other surprisingly personal reasons – which are usually beyond the driver’s control.

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Now let’s look at why car insurance rates continue to rise – and how drivers can take matters into their own hands to get cheaper car insurance in 2025.

1. Driver’s creditworthiness

Many drivers may not realize this, but even for people with a clean driving record, credit history issues can drive up car insurance costs. On average, car insurance for drivers with poor credit costs more than twice as much as car insurance for people with excellent credit.

Here is data on average monthly car insurance costs as of 2023, based on research from Motley Fool Money:

Bad credit can cost drivers an additional 53% on car insurance. People who have experienced financial difficulties can expect to be treated by banks as higher-risk borrowers. Unfortunately, poor credit also results in drivers being treated as higher risk customers by car insurance companies.

2. Age of the driver

Another important reason why car insurance is expensive is the age of the driver. Young people are less experienced behind the wheel. Sometimes they are still learning to avoid risky situations, control their impulses, put down the phone, and contain their anger in traffic. For all of these reasons, car insurance companies consider younger drivers to be riskier than older drivers.

Research from 2023 found these nationwide average car insurance rates for drivers of different ages:

• Age 18: $5,988 per year

• Age 35: $2,195 per year

• Age 65: $1,979 per year

The cost of car insurance for teen drivers can be a huge expense. Consider how little an 18-year-old might make from his part-time job, and it might not be worth buying a car for a teenager when car insurance alone costs nearly $500 per month. Fewer teenagers are getting driver’s licenses today compared to previous generations. Perhaps the high cost of car insurance for teenagers is one of the reasons for this.

3. Gender of the driver

Men tend to have more serious and fatal car accidents than women. Research from the Insurance Institute for Highway Safety found that from 1975 to 2019, men were twice as likely as women to die in car crashes, and in 2019, 71% of all car crash deaths were men.

But even though men are more likely to die in car accidents, there appears to be a better balance between the overall frequency and cost of car accidents involving men and women as drivers. Gender equality is not yet a reality when it comes to the pay gap in the workplace, but it is getting closer in the world of car insurance. Men pay slightly higher car insurance premiums than women, but only about $2.16 more per month on average.

4. Driver’s country of residence

Even drivers with good credit, a clean driving history and a “safe” age could still face high insurance costs simply because they live in the wrong state. The cost of car insurance varies greatly from state to state.

The state with the highest cost of car insurance in 2023 was Michigan, with an average annual car insurance premium of $5,766. That’s nearly double the national average of $3,017 and much more expensive than Michigan’s neighboring states of Wisconsin ($2,346), Ohio ($2,238) and Indiana ($2,065).

Why does car insurance cost so much more in different states? Each state has its own small auto insurance market with its own state-level laws and policies that affect insurance prices. Some states make it difficult for drivers to obtain affordable minimum liability insurance. Different states may experience higher accident rates, a higher incidence of natural disasters, and higher litigation costs.

Is it ever worth moving to another state because the cost of car insurance is too high? Probably not for most people. However, if current trends continue, some people in states like Michigan may feel like their car insurance costs almost as much as their monthly housing payment.

Conclusion

People who feel burned out over the cost of car insurance should take matters into their own hands and Search for price offers. The best car insurance companies may offer a better deal than the driver’s current insurance policy.

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